Last Tuesday, August 20th, Independence Northwest hosted a community forum focusing on the big changes afoot in brokerage services and how those changes will affect providers and the provider community. We had an excellent turnout and lively conversation. A couple dozen providers (primarily Independent Contractors and a few Domestic Employees) came together to discuss upcoming systemic shifts including a change to how providers will be paid and quite possibly, how much they’re paid. As mentioned in earlier articles published by Independence Northwest, these changes are a result of the K Plan and poor audit findings. Read more about that here.

Significant Rate Reductions Potentially Ahead for Providers?

At present, SEIU (Service Employees Union International) and the State of Oregon Department of Human Services are in the process of bargaining rates for SEIU’s provider members. Thanks to House Bill 3618, all Domestic Employees and the majority of Independent Contractors serving brokerage customers are represented by SEIU. You’ll often hear these providers referred to as PSWs [Personal Support Workers] as a result).

Elvyss Argueta, an SEIU organizer who showed up to Tuesday’s forum, dropped a bombshell when he announced that there is movement by the State in current negotiations to reduce the top amount an Independent Contractor can be paid from $24 per hour to a paltry $14.00.

On Wednesday, August 21st, 2013, SEIU sent an email blast out to its members confirming Elvyss’s claims. Per SEIU: “We met with the state last Tuesday and bargained into the evening… The State is continuing to press for significant cuts to Independent Contractor rates … (and) is proposing that Independent Contractors’ current wages will only be kept whole until July 2014, at which point IC wages will drop to $14 per hour. This is unacceptable.”

We agree. Dropping rates down to such a measly rate would create a true crisis for the providers affected and the families and customers who receive services from them. There’s really no way to sugarcoat this. If SEIU’s claims become a reality, this type of service provider (with very few exceptions) will cease to exist as an option for brokerage customers.

Understanding the “Wage” of an Independent Contractor

First things first: employees and contractors are completely different animals. Decision-makers must understand this. The mere suggestion of cuts this deep points to a misunderstanding of not only the unique supports provided by these small businesses, but also of the very definition of an independent contractor.

On the surface, $14 per hour may sound like a fair and decent wage. It’s several steps above minimum wage and is considerably higher than the average direct support professional’s wage in Oregon. However, a closer look at what an Independent Contractor is and does reveals a completely different picture (please stick with us while we offer some context.) Independent Contractors get “paid” rates like $24 per hour because they assume all responsibilities for their own taxes, insurance and benefits; as a result, they take home much less than you’d think. The State was keenly aware of this important distinction as it developed a set of published rate ranges at the onset of brokerage services in the early ’00s.

Let’s start with a typical employee situation. If you are employed by a company and earn $14 per hour, that fourteen dollar figure does not represent the whole story. For starters, add 12% due to the taxes your employer must pay just to employ you and the cost jumps to $15.68 per hour or more. Then, let’s say you get health benefits – even low level benefits – from your employer. That’s probably another $300 per month (about $3,600 per year). That ends up costing your employer another $1.73 or so an hour, bringing your “wage” up to $17.41. Now, let’s throw in two weeks paid vacation and another week of sick time. That costs your employer about $1,881 for the three weeks (another 90 cents an hour) and now we’re up to $18.31 per hour. Maybe you have 401(k) or retirement benefits or if you are a government employee, maybe there’s some PERS being stashed away on your behalf. Your employer buys the supplies you need to do your job, pays for you to attend trainings, pays business insurance and liability insurance, pays for Workers Compensation insurance and mileage reimbursement and on and on… Anyway, you get the idea. $14 to you isn’t $14 to your employer.

Now let’s reverse all of that and look at it from the perspective of a contractor.

A properly classified Independent Contractor is a walking business. Unlike an employee, a contractor has no employer to offer them benefits, liability insurance, mileage/travel costs, computers, office supplies, software, training, sick or vacation time. Everything *starts* at the hourly rate which is exactly why they charge more. Your Independent Contractor might charge $24 to your Plan of Care, but his/her take-home is nowhere near that. Chances are pretty high that your Independent Contractor doesn’t drive a Lexus.

If Oregon starts paying Independent Contractors $14 per hour, these workers will very likely take home less than minimum wage for a professional service. Why would someone do all this work to make less than the guy across the street employed by a brokerage customer or provider organization? Why carry the headache of purchasing liability insurance, ensuring proper deductions, paying self-employment taxes (15.3% in 2013), worrying about your own health insurance only to make less?

If rates really are reduced to this level, we will witness hundreds of small businesses shutter and close up shop. Small businesses truly are the engine fueling Oregon’s current economic recovery.

The Need for Diversity of Provider Types to Serve a Diverse Population

We are lucky to have at our fingertips a rich community of Independent Contractors with varied backgrounds and specialties: former teachers, former case managers, people from the business community who decided they wanted to something more rewarding with their lives. Just as we value diversity in the people we serve, we value diversity in our provider base. We don’t just value that diversity for its own sake. We value it because it promotes choice and increases the quality of supports customers receive. Brokerage customers have wildly variant needs and that calls for a wildly variant set of skills in the provider community. Caregivers in the home meet certain essential needs for our customers. Skills trainers meet others. Provider agencies meet still others. It’s the diversity of choice that makes brokerage services exemplary and completely unique in the system.

A Need for Capacity and a Pledge of Support

In the Portland metro area, we work with hundreds of independent contractors. They have played an integral role in the development of brokerage services over the last twelve years and are a highly valued, essential part of this system. As the K Plan rolls out, more services will be available for our customer base. This is a great thing. But all those extra financial resources mean nothing unless we have qualified, competent providers who can make a living doing the work. If we price them out, we all lose. Reducing capacity makes no sense.

We realize all too well that information is changing rapidly. This reduction may not even be on the table in a week. But, presently, this conversation is on the table. We feel an obligation to respond to this public information and to support the providers we, our customers, and their families rely on each day for critical health and safety supports. Independence Northwest stands in unequivocal opposition to a reduction in the rates of any provider who serves brokerage customers.

We encourage providers to communicate with their legislators and leadership at the State to advocate for no reduction to the rates and to educate them on the services they provide. We promise to do the same.

Any reduction in rates for providers serving our customers is a step backward for all of us.

Please Note: The proposed $10 per hour reduction is specific to those providers who fall under the Personal Support Worker/Independent Contractor designation. Services such as Behavioral and Social/Sexual Supports are not included in the announced proposed reduction.

“WE HAVE GOOD NEWS!!!! Today our federal partner, the Centers for Medicare and Medicaid Services (CMS) informed Oregon that guardians can be paid to provide care to their loved ones with the right processes in place. We are working quickly with CMS to clarify those processes and to develop a new notice for beneficiaries, but we wanted to share this information with you as soon as possible. When those details are worked out, we will provide you with an update and more information about next steps.

Thank you for your patience as we have been working through this difficult issue. We know that this issue is important and that the uncertainty about how we are moving forward is stressful for families and their loved ones. We appreciate the care and concern we have heard these past weeks and we remain committed to providing you with the most up-to-date, accurate information that we have.” Patrice Botsford Director, DHS Office of Developmental Disabilities Services

As mentioned in last week’s piece, Oregon’s Department of Human Services has chosen to change its primary funding source from Title XIX Waiver services to the new Community First Choice Option/K Plan. This change increases federal revenue for Oregon and expands services for seniors, people with physical disabilities, and children and adults with intellectual and developmental disabilities. With the additional revenue comes new mandates and expectations.

Perhaps the most controversial change thus far is the mandate that legal guardians no longer be paid as care providers through brokerages. Keep in mind that legal guardianship requires a court order and is not something that automatically occurs when an individual with a developmental disability turns eighteen. Guardianship also requires annual renewal action by the guardian.

Per ODDS (Oregon Office on Developmental Disability Services), CMS (Centers for Medicare and Medicaid Services) views payment to a legal guardian as a conflict of interest (see CFR 441.505.) When the funding was coming primarily through waivers, guardianship payment was permitted, but because Oregon has chosen to change its primary funding to Community First Choice Option/K Plan, the expectation has changed. It is now consistent with the regulations for how services are implemented for seniors and people with physical disabilities.

Statewide, well over 400 guardians are paid to provide services, the majority of them supporting people served by brokerages. At present, brokerages and CDDPs (Community Developmental Disabilities Programs) have been directed by the state (ODDS) to begin conversations with our customers and their legal representatives about how to come into compliance with the new standards. We have requested clear, written materials to be shared with families and individuals regarding this directive.

As you can imagine, there has been a lot of concern and discussion on this topic. There’s quite a bit at risk here and clear, direct communication from all parties is key right now.

In a recent mailer to its members, SEIU (Service Employees International Union)claimed “some brokerages and CDDPs have incorrectly informed parent providers that they can no longer be their child’s guardian if they want to be paid as a provider. This is not true.” We share SEIU’s concerns on this change, but their mailer is misleading. ODDS has clearly and publicly stated this is their policy and has instructed brokerages and CDDPs to share this mandate and begin the conversation on this planned change. If one follows the directive up the chain, its genesis is with the government, not brokerages and CDDPs.

Two weeks back, ODDS Director Patrice Botsford released an extensive statement explaining the state’s position. “Families must make a decision whether the guardian will remain in place and not continue as the paid service provider and a new service provider chosen, or the guardianship may be terminated or transferred… We are asking that their decision be relayed to us via their case manager no later than December 1, 2013 for January 1, 2014 implementation.“Read her entire statement here.

Long-time disability rights advocate Representative Sara Gelser (D-Corvallis District 16) has become involved in the discussion. She recently began requesting stories through posts on her Facebook page. Per a post on August 7th, Rep. Gelser had met with Patrice Botsford and others at ODDS. Wrote Gelser: ” I had a very good meeting today with Patrice Botsford and her Deputy (Director) from the Office of Developmental Disabilities. I am feeling hopeful that we can find a solution that will meet everyone’s needs and will cause minimal disruption. Thank you for your stories. Please keep sending them, as they are very helpful.” She went on to thank Patrice and her team for partnering for a solution. Sara Gelser is beginning to look at potential legislative action that could influence the future.

At present, ODDS is developing an exception policy that will potentially allow for some guardians to be paid under the K Plan. The exception policy is still in draft format and will be reviewed by CMS in the next week or so.

Advocates throughout the system continue to comb through federal regulations and state law to see if there are other approaches that can be taken to address the situation. In the meantime, if you would like to be involved in the discussion and share your story, you have a few options.

Later this week, we’ll send out another missive on the Designated Representative piece. The representative issue is linked to the guardianship discussion, but deserves its own attention due to its complexity. For the sake of clarity, we’ll address it separately.

08/15/2013 UPDATE:
DD Director Patrice Botsford shared the following new information on ODDS’ Facebook page: “I wanted to quickly update you on where we are on our request for exception on guardians as paid caregivers. Our request is currently in the hands of CMS and their attorneys. We have near daily communication with them, and are looking forward to the best possible outcome. We are as anxious as you are, and we will post here as soon as we have any updates. Keep up the good work, and thank you all again for your advocacy and support.”